Nov. 20 (Bloomberg) -- Bayer AG decided not to raise its
takeover offer for Schiff Nutrition International Inc., yielding
to Reckitt Benckiser Group Plc’s $1.3 billion counterbid for the
U.S. vitamin maker.

The price would have been too high, the Leverkusen,
Germany-based company today in a filing with the Securities and
Exchange Commission. Bayer said Oct. 30 it had agreed to buy
Salt Lake City-based Schiff for about $1.1 billion, or $34 a
share. Reckitt began an unsolicited tender offer for Schiff Nov.
16 at $42 a share.

“This is a very good and very reasonable move,” Fabian
Wenner, an analyst at Kepler Capital Markets in Zurich, said in
a telephone interview today. “The higher price would have eaten
a good part of the expected synergies.”

Investors, anticipating a higher bid from Bayer or another
company, had pushed Schiff shares above the Reckitt offer price.
The stock fell 5.2 percent to $41.86 at the close in New York.
Reckitt rose 0.9 percent to close at 3,811 pence in London,
while Bayer gained 1.3 percent to close at 67.25 euros.

Financial Criteria

Executives “came to the conclusion that entering a
competitive bidding process would result in a price outside
Bayer’s set financial criteria,” according to the filing.
“Having completed a number of successful acquisitions, Bayer
plans to continue its strategy to augment organic growth with
strategic bolt-on acquisitions.” Bayer declined to comment
beyond the filing, a spokesman said.

The offer from Slough, England-based Reckitt values Schiff
at about 28 times earnings before interest, taxes, depreciation
and amortization. That compares with the median of 18 times
Ebitda in a survey of 13 similar deals in the past decade, data
compiled by Bloomberg show.

Breakup Fee

Bayer’s Oct. 29 agreement with Schiff allows the U.S.
company to accept an unsolicited higher offer within 30 days,
provided it pays Bayer a $22 million breakup fee. Schiff Chief
Executive Officer Tarang Amin would have received a $5 million
bonus if the Bayer deal was completed by Dec. 31.

TPG, the Fort Worth, Texas-based buyout firm, owns about 25
percent of Schiff’s shares, according to Schiff. Chairman Eric
Weider’s Weider Health & Fitness owns all of Schiff’s Class B
shares, giving him more than 75 percent of the aggregate voting
power, according to Schiff’s most recent annual report.

The purchase prices are based on about 31.1 million shares
outstanding, including shares underlying stock options. A buyer
also would assume about $122 million of net debt. Reckitt valued
its offer at about $1.4 billion, while Bayer said its agreement
was worth about $1.2 billion.